CUC to move away from diesel energy

Cayman’s power provider, the Caribbean Utilities Company, announced this week that the Utility Regulation and Competition Office has accepted its Integrated Resource Plan, a 125-page report that sets out a nearly three-decade road map for the territory to transition from mostly fossil fuels to more sources of renewable energy.

CUC has released portions of the plan, commissioned in August 2016 and produced by consultant Pace Global to study energy and market trends for the next 30 years, and provided the Compass with a full copy on Tuesday.

The report makes a number of recommendations that government and power industry officials have discussed over the years, including investing in battery energy storage, developing natural gas infrastructure, converting diesel-fired engines to dual-fuel, assessing the viability of ocean thermal energy conversion, supporting the development of landfill gas facilities and building more solar energy generators.

The recommendations are to be undertaken over the short, medium, or long run depending on economic and technological conditions. The recommendations are also lumped in six energy portfolios – a series of plans that emphasize varying energy options and strategies for Cayman – and ranked based on cost, risk, reliability, diversity and other factors.

The portfolio ranked highest was “Portfolio 5,” which calls for investment in natural gas infrastructure, wind power, solar and waste-to-energy through the year 2045. The net present value of total costs for Portfolio 5 is $1.55 billion.

Pace Global stated that a reliance on natural gas will help Cayman have an affordable energy source that allows the island to cut emissions while transitioning to renewable energy. Pace Global projects that Cayman would use gradually more natural gas starting around 2024 while existing generators are retired. The islands will also be getting more of their energy from solar and wind sources around that time.

“Natural gas can also provide optionality to the utility in terms of being able to switch from one fuel to the other based on prevailing market prices,” the consultant stated. “Further, natural gas can serve as a hedge against the volatility associated with diesel prices.”

The next-highest ranked portfolio was Portfolio 6, which was similar to Portfolio 5 but included the use of ocean thermal energy conversion, and would cost about $59 million more. Pace Global noted that this portfolio ranks the highest for energy diversity, renewable curtailment and land use – ocean thermal would mean that Cayman’s energy production would require less land.

“However, OTEC is not commercially proven and is a hurdle for this portfolio,” the report stated.

The report echoed statements recently made by OfReg Acting CEO Gregg Anderson, who said in Finance Committee in November that a proposed floating power plant in North Side would not produce energy at a reasonable price.

He said at the time that this type of power production, ocean thermal energy conversion, has not been successfully deployed on a commercial scale.

However, the company that is planning the floating power plant, Cayman OTI, has disputed the characterization that its plans aren’t financially feasible.

In response to Mr. Anderson’s statements in November, the company said a month later that it has offered an energy price that is “substantially lower” than the current rates incurred by Cayman consumers for energy.

“Cayman OTI has offered to provide further reductions through substantially lower capacity charges as diesel generating units are retired,” the company said in December.

Portfolio 4 met Cayman’s goals for carbon reduction, but called for much more investment in renewable energy sources rather than using natural gas. Therefore, this plan would be about $176 million more costly than the top-ranked portfolio, according to the report.

Portfolio 3, which calls for investment in natural gas and battery storage, is the most affordable, at a net-present value of $1.54 billion. However, the report stated that the strategy does not meet the territory’s target for carbon reduction.

Portfolio 2 called for Cayman primarily investing in natural gas but not storage or renewables.

“Portfolio 2 does better than Portfolio 1 in terms of costs and risks but continues to rely on large thermal capacity,” the report stated. “It comes closer to meeting the carbon emission reduction goals, but without storage is unable to meet the goals. This portfolio is close to meeting the [greenhouse gas] reduction target with a 57% reduction in CO2. As technology improves, this portfolio may have merit.”

“Renewable costs have come down significantly in recent years, and projections of the [Integrated Resource Plan] show that a combination of renewables, natural gas and smaller amounts of diesel, and battery storage will provide lower and more stable electricity costs than continued reliance on purely diesel-fired engines,” he stated in a press release. “Furthermore, the future supply mix reduces greenhouse gas emissions by 68% in 2030, meeting the Paris Accord climate targets and in line with goals of the Cayman Islands National Energy Policy.”